Tech stocks fall as AI spending worries Wall Street

Shares in major US technology companies fell on Friday after earnings reports raised Wall Street concerns about whether heavy artificial intelligence spending can produce returns quickly enough.

Microsoft, Alphabet and Amazon all reported quarterly results this week and signalled they would keep spending on data centres and chips. Along with Meta, which reported last week, the four companies are on track to spend more than $700 billion on capital investment this year, much of it on AI infrastructure, according to analyst estimates.

Christopher Low of FHN Financial told AFP that the companies were showing “growing pains” as they pursued the AI build-out. He said investors were reading company-specific problems as signs that the wider sector could slow.

Intel was hit hardest, with its shares sinking as much as 30 percent after it issued a fourth-quarter revenue forecast and cited weakness in the PC market and manufacturing bottlenecks. The source item said Intel's PC business had been hurt by higher memory prices and supply problems linked to the AI infrastructure build-out.

Amazon shares also fell. Low said demand for Amazon's cloud services remained strong and the company was nearly doubling AI-related spending this year, while retail revenue was weak, increasing the need for debt to finance the build-out.

Alphabet shares fell 12 percent on Thursday, their worst day since the Google parent went public in 2004. Low said investors were worried that weaker search advertising may be partly linked to AI-assisted search avoiding ads, while returns on Alphabet's AI investments were weak.

Steve Sosnick of Interactive Brokers said the tech giants had been priced for perfection, leaving little room for disappointment. Other analysts cited in the source said cloud results remained strong but that investors were becoming more uncertain about which companies and sectors AI would disrupt.